IBA Health (ASX:IBA) CEO Gary Cohen
Sydney, April 22, 2009 AEST (ABN Newswire) - IBA Health Group Limited (ASX:IBA)(PINK:IBATF) recently announced the acquisition of Hatrix, an Australian based maker of electronic medication management products, for an up-front consideration of A$2 million. What was the rationale for the acquisition?
Executive Chairman & CEO Gary Cohen
Medication management is a critical area where electronic records can reduce adverse medical events and save lives. This is particularly so in the prescribing of medication inside a hospital where electronic records can reduce the risk of dangerous drug interactions and drug allergies. With Hatrix we've acquired specialised intellectual property in this important area. Hatrix has very clever people and products but by itself didn't have the financial means to reach its full potential. We have the global footprint and financial strength to drive sales globally and, in combination with our own suite of products and markets, Hatrix's MedChart medication management and MedShare secure, shared patient medication record systems offer a very real value proposition.
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IBA's Hatrix consideration also includes potential earn-out payments capped at A$13 million to be paid over the next three years. What's the basis for the earnout payments and what's the expected earnings contribution of Hatrix in your first full year of ownership?
Executive Chairman & CEO Gary Cohen
The actual earn-out payment will depend on the EBIT of the business over the period of the earn-out, and the maximum potential price of A$13 million would put the acquisition at approximately 4 times EBIT. The initial consideration was primarily for the intellectual property.
We expect Hatrix to make a positive contribution in our first full year of ownership, however we haven't provided details of the expected contribution to the market.
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IBA also recently announced the completion of its 2 for 7 accelerated pro-rata entitlement offer, which raised A$116.4 million at A$0.55 per share. IBA also raised A$7.2 million from a proportional 2 for 7 offer to convertible noteholders. The institutional component of the offer was fully subscribed, raising A$83.6 million, while the retail component raised A$32.9 million compared with a maximum entitlement of A$40.2 million. With other recent retail offers finding little support, why was the IBA offer so well supported?
Executive Chairman & CEO Gary Cohen
Our shareholders have remained very supportive of our business and our strategy. Our business has continued to grow and remain strong, even as the global economic crisis has unfolded around us.
Our largest shareholders also expressed their support for our intention to deal with the most expensive part of our debt and we had a good indication, as far back as our first-half roadshow in February, that a capital raising would be well received by the institutional market.
The retail shareholder base is always more difficult to gauge but our stock has been a clear out-performer in a poor overall market, which I think helped instil confidence. We were very pleased at the outcome of the retail offer.
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Post the offer, IBA's net debt should drop to A$207 million compared with A$322 million at the end of December 2008 and gearing fall to around 30 percent from 45 percent. What capacity do you now have for investment in growth and what are your longer term debt and gearing targets for the business?
Executive Chairman & CEO Gary Cohen
We believe a gearing level of up to 30 percent to be a comfortable level for the normal operations of the business.
The raising closes the circle on the interim funding that we put into place for the iSoft acquisition. Since then we've retired over A$160 million of debt and liabilities we inherited as part of the acquisition. This demonstrates the capacity of the business to generate cash, and carry and discharge such investment debt.
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Your guidance for the current year ending June 2009 is for revenue of A$540 million to A$560 million and EBITDA of A$120 million to A$130 million. Is there upside to this guidance?
Executive Chairman & CEO Gary Cohen
We haven't changed our guidance for 2009. As we said at our half-year result in February, we're being cautious amid the economic downturn even though we don't see anything on the horizon that we'd deem as a specific threat to our business.
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In your first-half results announcement you indicated IBA would seek to reinstate dividend payments at the end of the current year. Does the rights issue have implications for the potential quantum of the dividend?
Executive Chairman & CEO Gary Cohen
We haven't changed our position in this regard.
Contact
Gary Cohen
Executive Chairman & CEO
IBA Health Group Limited
Tel: +61-2-8251-6700
Email: gary.cohen@ibahealth.com
Stuart Kelly
Director Corporate Affairs
IBA Health Group Limited
Tel: +61-2-8251-6769
Mobile: +61-404-082-361
Email: stuart.kelly@ibahealth.com
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